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IT. S. Senator from Washington, Chairman of Commerce Committee 

THE Merchant Marine Act of 1920 is an earnest effort 
to lay the foundation of a policy that will build up 
and maintain an adequate American merchant marine 
in competition with the shipping of the world. 

The first section declares that the United States needs for 
national defence and the proper growth of its commerce a 
merchant marine of the best type of ships sufficient to carry the 
major part of its commerce, such vessels to be owned ultimately 
and operated privately by its citizens. It asserts it to be the 
policy of the United States to do whatever may be necessary 
to secure such a merchant marine, and the Shipping Board is 
directed to keep this purpose and object always in view as the 
primary end to be attained in the disposition of our ships, in 
the making of rules and regulations and in the administration 
of the shipping laws. This expresses the thought, desire, pur- 
pose and aim of the American people. This section is the 
chart to guide and the yardstick to measure every act of the 
Shipping Board and should be kept in mind in the construction 
of every provision of the act and in every decision the board 
may make. 

A shipping board of seven commissioners is to be appointed 
by the President. They are to hold office for six years and to 
receive a salary of $12,000 per annum. Their special fitness 
for the work they are to do is to govern their selection, and 
all important sections of the country are to be represented. All 
the ships and other property of the United States acquired 
by the President during the war except those in the military 
and naval service of the United States are transferred to the 
board, to be controlled, used and sold by it to citizens of the 
United States. While certain principles are laid down to be 
followed by the board in making sales, it is expressly directed 
to seek to achieve the declared purposes of the act and to carry 
out the policy declared in section 1. In the last analysis the 



board can dispose of the vessels and property of the United 
States upon such terms and under such conditions as in its 
judgment will accomplish this purpose. If the board finds 
that certain vessels are unnecessary to the promotion and 
maintenance of an American merchant marine and cannot be 
sold to citizens of the United States, it may sell such vessels 
to aliens upon a vote of five of its members. Vast and un- 
usual powers are given to this board. This must be done. 
The work to be done is as important and difficult as any that 
confronts the Government, if it is not the most important. 
The board must have wide discretion and vast power to meet 
the diverse situations that will confront it. It can make or 
mar our merchant marine. The success of the Merchant Ma- 
rine Act depends upon it. Men of the greatest ability, the 
widest experience, the most unyielding firmness and the most 
intense Americanism, men moved by the spirit and purpose of 
the act, must be put upon this board. No richer reward can 
come to any man than to have a large part in doing the great 
thing ths board is to do. 

Section 7 authorizes and directs the board to investigate and 
determine as promptly as possible what steamship lines should 
be established and put in operation to promote, develop, ex- 
pand and maintain our foreign and coastwise trade and pro- 
vide for an adequate postal service and to sell or charter ships 
to citizens who will agree to establish and maintain such lines. 
The board is given a wide discretion in fixing the terms and 
conditions that will secure this service and if private citizens 
cannot be secured to supply it the board is directed to operate 
vessels itself on such lines until business is developed that will 
lead to a satisfactory arrangement by private parties to carry 
them on or it shall appear that such lines cannot be made self- 
sustaining. To aid in this the Postmaster General is author- 
ized to contract for the carrying of mails over such lines at 
such price as may be agreed upon by himself and the board. 
To encourage the establishment of lines from various ports 
preference in the sale of vessels for these purposes must be 
given to citizens who have the support of the domestic com- 
munities primarily interested in such lines if the board is satis- 
fied of the ability of such persons to maintain the service de- 
sired. This is a section of far-reaching importance and, if 




wisely administered, should go a long way toward developing 
a merchant marine upon a stable basis and lead to a great and 
permanent expansion of our commerce and the creation of 
banking facilities and commercial agencies now so much needed. 
If our business men are assured of certain, regular and perma- 
nent transportation facilities between ports and markets they 
will establish the necessary banking facilities and commercial 

The board is authorized to create, maintain and administer 
a separate insurance fund which may be used to insure, in 
whole or in part, vessels and plants owned by the board against 
all hazards commonly covered by insurance policies in such 

During a period of five years, the board may set aside 
annually out of the revenues from sales and operations the 
sum of $25,000,000 to be known as a construction loan fund. 
This fund is to be used in aid of the construction of vessels of 
the best and most efficient type for the establishment and main- 
tenance of service upon steamship lines deemed necessary by 
the board. Aid may be given up to two-thirds of the cost of 
the vessel to be constructed, ample security being required by 
the board to insure repayment of the sum advanced. While we 
have a large tonnage built under the needs of war, our ship- 
ping is sadly lacking in up-to-date combination freight and 
passenger ships. We must have such ships to compete with 
our rivals. They are especially needed in the South American 
and Oriental trades. Under this provision it is hoped that 
the building of such vessels wll be encouraged and a well- 
balanced fleet secured. 

During the war great docks, piers, warehouses and terminal 
equipment and facilities were constructed or acquired at various 
ports by the United States. These facilities ought to be a great 
aid in the development and operation of a merchant marine. 
The agency whose special responsibility it is to build up such 
merchant marine was deemed the best agency to have control 
of these facilities and they are to go into the possession and 
control of the Shipping Board on January 1, 192 1, ample pro- 
vision being made, however, to take care of any emergency 
needs of the War or the Navy Department. Preference in the 
use of these facilities should always be given to American ships. 



No vessel purchased from the board or documented under 
the laws of the United States can be sold, transferred or mort- 
gaged to an alien without the approval of the board being first 
obtained, and any vessel chartered, sold, transferred or mort- 
gaged to an alien without the consent of the board shall be 
forfeited to the United States and those violating this pro- 
vision are subject to fine or imprisonment. The purpose of 
this is obvious. 

Section 19 is one of far-reaching consequence. The more 
one knows of the handicaps put upon our shipping by foreign 
rules and regulations and by the diverse and conflicting rules 
and regulations of our own departments, the more important 
this section appears. It not only authorizes the board to make 
rules and regulations necessary to carrying out the provisions 
of the act but it also authorizes the board to make rules and 
regulations affecting shipping in the foreign trade not in con- 
flict with law in order to meet general or special conditions 
that may be unfavorable to our trade which arise out of for- 
eign laws, rules or regulations, or from competitive methods 
or practices employed by owners, operators, agents or masters 
of vessels of a foreign country. This will enable the Ship- 
ping Board to meet promptly orders in council and other 
similar acts of other countries which have heretofore been used 
to the great disadvantage of our shipping. In order to secure 
uniform rules and regulations upon the part of the various 
departments affecting shipping, the board may request the 
suspension, modification or annulment of rules or regulations 
made by any such department, or it may request the making of 
new rules or regulations; and it is also provided that no rule 
or regulation shall hereafter be made until the same has been 
submitted to the board for its approval. In case of a dis- 
agreement between the board and any department as to these 
rules or regulations such disagreement is submitted to the 
President and his decision is final. This, if properly and firmly 
carried out, will result in uniform rules and regulations affect- 
ing our shipping that cannot help but be of great benefit, and 
it will also prevent the making of any rule or regulation until 
its effect upon our shipping is duly considered. 

Section 20 is intended to place in the Shipping Board and 
the Secretary of Commerce ample power to prevent unfair 



methods and unjust discriminations upon the part of foreign 
shipping against our shipping and our commerce and provides 
that if the board determines that any person has violated any 
of the provisions of section 20 and is a party to combinations, 
agreements or understandings prohibited and will certify this 
fact to the Secretary of Commerce, the Secretary shall refuse 
the right of entry to any ship owned by such person or by 
any carrier directly or indirectly controlled by him into any 
port of the United States until the board certifies that such 
violation has ceased or that such combination, agreement or 
understanding has been terminated. If our carriers give re- 
bates we can punish them. If our foreign competitors give 
rebates we cannot do so. If our carriers cannot give rebates 
and their competitors can ours must fail. Any means we can 
adopt to put us on an equality should be applied. This section 
will do it. It is solely in the interest of f airplay and just 
treatment to us and should be used firmly. 

Under section 21 the coastwise laws of the United States 
are extended to our island territories and possessions after 
February 1, 1922, if adequate steamship service at reasonable 
rates to accommodate the commerce and passenger travel has 
been established, and the board is directed to establish and 
maintain such service until it can be taken over and operated 
by private capital and enterprise. To insure that none of these 
possessions will be without adequate service the President is 
authorized to extend the period within which such coastwise 
laws are to be extended for such time as may be necessary for 
the establishment of adequate shipping facilities. The trade 
of some of our island possessions is over a hundred million 
dollars a year. It has been largely carried in foreign ships. 
It ought to be carried in American ships and offers an oppor- 
tunity not only to put under the American flag more ships but 
ships of the highest type and most desirable for ocean com- 
merce. The carrying of that trade should be ours. We can 
have it if we will. If we do not take it no one is to blame but 
us. With the assurance given private enterprise should pre- 
pare to handle this trade. 

Section 23 gives special encouragement to the building of 
new and up-to-date ships. It exempts, for a period of ten 
years, the owners of vessels documented under the laws of the 



United States and operated in the foreign trade from income, 
war-profits and excess-profits taxes if such taxpayer either 
invests or sets aside in a trust fund for investment an equiva- 
lent amount to be used in the building of vessels of the type 
and kind approved by the Shipping Board, with a provision 
that at least two-thirds of the cost of such vessel so constructed 
shall be paid for out of the private funds or capital of the 
person having such vessel constructed. It is also provided 
in this section that any person who may sell a vessel docu- 
mented under the laws of the United States and built prior to 
January I, 1914, shall be exempt from these taxes if the entire 
proceeds of such sale shall be invested in the building of new 
ships of a type to be approved by the Board. Our merchant 
marine needs fast passenger and fast combination freight and 
passenger ships very badly. It is hoped this provision will 
be an aid in securing them. I understand that over 300,000 
tons have been contracted for under this provision already — 
mostly, however, tankers, which are greatly needed. 

Section 24 requires all United States mails carried on vessels 
to be carried on American-built vessels if practicable. The 
Board and the Postmaster General shall determine from time to 
time the just and reasonable rate of compensation to be paid for 
a satisfactory postal service and the Postmaster General is au- 
thorized to enter into contracts within the limits of appropria- 
tions therefor made by Congress to pay for the carrying of 
such mails in such vessels. We have been paying about 
$3,000,000 a year for the carrying of our mails on ships and 
of this sum about two and a half millions has been paid to 
foreign ships, thereby practically subsidizing them to that ex- 
tent. By proper cooperation between the Shipping Board and 
the Postmaster General this provision can be of great aid in 
developing and maintaining regular shipping lnes. 

In the hope of developing an organization in this country 
similar to Lloyds, Section 25 requires that all vessels owned by 
the United States shall be classified by the American Bureau 
of Shipping so long as that bureau is maintained as an organi- 
zation without capital stock and pays no dividends. The Sec- 
retary of Commerce and the chairman of the Shipping Board 
shall each appoint a representative to represent the Government 
upon the executive committee of the American Bureau of Ship- 



ping, who shall serve without compensation. Lloyds has been 
a great factor in building up the British marine. We hope to 
make the American Bureau of equal help to our marine. 

Much objection has been made to Section 28. A large part 
of this criticism, though honestly made by our people, I am 
convinced has its origin in alien interests. Under the Railroad 
Transportation Act the Interstate Commerce Commission may 
allow preferential rates over American railroads on imports 
or exports. These preferential rates under that act apply to 
imports or exports whether carried in alien ships or American 
ships. The Shipping Board investigated the matter carefully 
and came to the conclusion that such preferential rates should 
not be applied to imports and exports carried in alien ships 
if American ships were available, and the sole purpose and 
effect of Section 28 is to provide that if American shipping is 
available then preferential freight rates shall not be given to 
imports or exports carried over American railroads unless such 
exports or imports are carried in American ships. The wise 
application of this provision rests solely with the Shipping 
Board and the Interstate Commerce Commission. The power 
given them can be made of tremendous benefit to American 
shipping and American commerce, and the people of the coun- 
try and of the various ports should feel that this power will 
be used in their interests and not to their injury. 

Under Section 29 encouragement is given to the development 
of American marine insurance companies or organizations by 
exempting such associations from the operation of the anti- 
trust law. American capital does only about ten per centum 
of our hull insurance and only about thirty per centum of our 
other marine insurance. Every possible encouragement should 
be given to it to do our own insurance. If it won't do it the 
Government very likely will do it. American insurance is 
almost if not essential to a permanent marine. 

Section 30 is a very complicated section, but the purpose and 
object of it are to encourage the investment of American 
capital in ships and shipping securities. It gives such invest- 
ments a security not heretofore enjoyed and makes a mortgage 
upon a ship a prior lien except as to certain specified claims. 

Considerable discussion has arisen with reference to Section 
34, which directs the President to give notice of the abrogation 



of the provisions of certain commercial treaties. The purpose 
of this section is to terminate in an orderly, courteous and 
diplomatic way treaties which are detrimental to our interests 
and which prevent us from doing what we think ought to be 
done to encourage and build up our American merchant 
marine. We could pass such legislation if we desire and abro- 
gate these treaties in this way. This is not the proper and 
courteous way to deal with such matters. No complaint by 
foreign countries can be made against the method provided 
in this act. We are seeking to do only what other countries 
are doing. France has already notified us of her intention 
to terminate her commercial treaty with us, and she has given 
a smilar notice to Great Britain, Canada, Spain, Greece and 
other countries. Spain, Italy, Norway, Greece, Sweden, Bul- 
garia, Great Britain and other countries are getting rid of 
treaties that may hamper them in the contest for the world's 
trade. It will be little short of criminal if we do not free 
ourselves from those things that shackle us and prevent us 
from doing what we know is for our best interests. These 
other countries are looking after their own interests. If we do 
not look after ours, no one else will. 

Wherever possible alien interests are hiring the best Ameri- 
can legal talent, buying the highest American writing ability, 
controlling the most powerful American papers, journals and 
magazines and cajoling or coercing American officials to serve 
their end. Their paid agents will be found in meetings like 
this to point out dangers and difficulties. They will present 
to public officials cogent reasons why it will be unwise to take 
this course or follow that policy. Business men will be threat- 
ened by their business connections and communities will be 
intimidated by threatened withdrawal of transportation facili- 
ties. Professors in our colleges and theorists in our army 
and navy will be encouraged to urge that those who seem to 
be especially fitted or trained to do the ocean-carriage should 
be allowed to do it without competition. 

They will overlook the terrible experience that came to 
us at the beginning of the world war as the result of such a 
policy. Our shipping could be done more cheaply by others, 
and so we had none. When the war came this lack of shipping 
cost us hundreds of millions of dollars in higher freight rates 



or business losses and hundreds of millions of waste in the 
hasty building of ships to meet the emergency that threat- 
ened the overthrow of civilization, and today the papers are 
filled with stories of waste, corruption and inefficiency that 
was the inevitable result of the conditions and the situation 
that confronted us. 

The man or the paper who would discourage the upbuilding 
of our merchant marine is fighting the battle of alien interests. 
We have the brains; we have the ability; we have the energy, 
and we have the means to build up an American merchant 
marine. We have the need to stimulate us to do it, and if 
every true American citizen will determine to do his part to 
this end and not allow us to be diverted by fear, threats or 
cajolery from that great purpose we will succeed. 

If the American people want an American marine they must 
be willing to work and sacrifice for it. Support must be given 
to those who seek to built it up. Counsel must be taken of cour- 
age and not of fear. Our competitors will deceive us, scare 
us, bluff us or destroy us if they can. " Fairplay ", the great 
shipping organ, of London, said frankly a short time ago : 

When it has been a question of the survival of the fittest we have invariably 
done our level best to crush or mold opposition, and, as regards America's 
new mercantile marine, we shall go on doing it and expect her to do the 
same by us. 

We do not seek to crush Britain's marine, but we do desire to 
build up a merchant marine ample to do the major part of our 
own ocean-carriage and that part of the world's carrying com- 
mensurate with our wealth, power and standing among the 
nations of the world. This is necessary for our commercial 
growth, our national defence and national independence, and 
it is necessary for the world's peace and safety. If one nation 
dominates the shipping of the world it holds the destinies of 
all peoples in its grasp. 

I had something to do with the drafting of our merchant 
marine act. I know the spirit that moved those who wrote it. 
Partisanship had no place in its consideration. We acted as 
Americans and not as partisans. Every word, every line, 
every paragraph and every section was written solely in the 
interest of the United States. We seek to assure our people 



equal treatment, square dealing and a fair chance in the world's 
carrying business. With this they can hold their own with 
any ships. There may be provisions in the act that ought not 
to be there. Experience will show them and they will be re- 
moved. There are many things that should be added and I 
hope this will be done. Destructive criticism alone will en- 
courage and aid our competitors. Constructive criticism will 
help us. If every American will place the nation's good 
above individual welfare; think, talk and act Americanism 
and give whole-hearted support to the law passed to aid the 
United States and uphold those who administer it solely in the 
interest of the United States and its citizens, we will have an 
adequate merchant marine that will secure our own interests 
and promote the world's welfare.